FHA Excess Land, Which site size in the grid

[BillyD]

I couldn't find anything in FHA or any forum, regarding what site size to put in the grid when appraising a home with excess land. For example it is a 25,000 sf site but half of the land is excess land. Do you put 12500 sf in the grid, or 25,000 sf and provide narrative, as to why (or why not), adjustments were made. I would think it would get "kicked out" of UAD, if the site section reads 25,000 sf and grid 12,500 sf, but 25000 sf in the grid seems misleading. Anyone have any guidance. Thanks in advance.

 

[J Grant]

FHA does not allow excess land ( a dividable lot ) to be valued, even when it is included in the transaction. The FHA uniquely instructs to exclude the value of excess lots . (unless it changed yesterday, idk

 

[Scuttlebutt]

What is the subject of your appraisal? If you're being asked to appraise the entire property, including the excess land, then 25,000 sf is the appropriate way to go. No adjustment would be required if you are valuing the entire property, including excess lot. Of course, you'd want to discuss the excess lot and the value inherent therein.

If the home is on a single 12,500 sf lot, and the other 12,500 sf is a legally separate parcel, you could appraise the home and supporting lot without the additional lot (excess land). Again, you need to determine what the subject of the appraisal is. Step 1 of the appraisal process, identify the relevant characteristics of the property.

 

[J Grant]

I couldn't find anything in FHA or any forum, regarding what site size to put in the grid when appraising a home with excess land. For example it is a 25,000 sf site but half of the land is excess land. Do you put 12500 sf in the grid, or 25,000 sf and provide narrative, as to why (or why not), adjustments were made. I would think it would get "kicked out" of UAD, if the site section reads 25,000 sf and grid 12,500 sf, but 25000 sf in the grid seems misleading. Anyone have any guidance. Thanks in advance.

For FHA, assuming that the subject sits on a 12,500 SF lot ( and the rest is excess ) then enter 12,500 sf for the lot on the grid, and disclose in the appraisal that an additional lot is being transferred with the subject as part of the sale, however the excess land is not induced in the value per the FHA instruction))

 

[BillyD]

Thanks for the response. Just curious, J Grant, if you ever experienced this, and if it got "kicked out" as page one will read 25,000 sf as that it was is legally described under the parcel number. I agree, that 12500 in the grid makes the most sense, as that is truly what is being valued, even though the entire parcel will be part of the loan. Waiting for an answer from FHA, but that is often difficult.

Scuttlebutt, For clarification, the site is legally described as being 25,000 sf, but only 12,500 sf can be valued, per HUD handbook 4000.1. It is one parcel (25000) but two buildable sites. Its about the clearest case of excess land I have ever come across. Just wondering on experience on whether to make page one and grid not match, or make them them match and have the adjustments in the grid not be as apparent. Its kind of an underwriter lose, lose situation.

 

[J Grant]

Thanks for the response. Just curious, J Grant, if you ever experienced this, and if it got "kicked out" as page one will read 25,000 sf as that it was is legally described under the parcel number. I agree, that 12500 in the grid makes the most sense, as that is truly what is being valued, even though the entire parcel will be part of the loan. Waiting for an answer from FHA, but that is often difficult.

Scuttlebutt, For clarification, the site is legally described as being 25,000 sf, but only 12,500 sf can be valued, per HUD handbook 4000.1. It is one parcel (25000) but two buildable sites. Its about the clearest case of excess land I have ever come across. Just wondering on experience on whether to make page one and grid not match, or make them them match and have the adjustments in the grid not be as apparent. Its kind of an underwriter lose, lose situation.

I have never done an FHA appraisal where it was excess land is included in the sale, but if I did, and assuming the FHA instruction is still not include it,
I would put in 12,500 as the lot size for the subject since that is what is being valued. (and explain an additional 125,500 excess land lot is included in the sale )

If you choose to put in 25,000 SF , and put zero as the adjustment, then explain that only the primary lot of 12,500 SF is being v valued per FHA and that was no adjustment is applied.'

Have you looked up for yourself the FHA direction wrt excess land?

 

[Dublin ohio]

Scuttlebutt, For clarification, the site is legally described as being 25,000 sf, but only 12,500 sf can be valued, per HUD handbook 4000.1. It is one parcel (25000) but two buildable sites.

Can the excess site be sold as is. Not needing a lot split with a separate legal. Is there one or two parcel numbers

 

[Dublin ohio]

I have never done an FHA appraisal where it was excess land is included in the sale, but if I did, and assuming the FHA instruction is still not include it,
I would put in 12,500 as the lot size for the subject since that is what is being valued. (and explain an additional 125,500 excess land lot is included in the sale )

If you choose to put in 25,000 SF , and put zero as the adjustment, then explain that only the primary lot of 12,500 SF is being v valued per FHA and that was no adjustment is applied.'

Have you looked up for yourself the FHA direction wrt excess land?

You only value to primary site using a hypothetical condition. So if using a hypothetical. I would only used the area of the primary site throughout the report

Excess and Surplus Land Definition

Excess Land refers to land that is not needed to serve or support the existing improvement. The highest and best use of the Excess Land may or may not be the same as the highest and best use of the improved parcel. Excess Land may have the potential to be sold separately. Surplus Land refers to land that is not currently needed to support the existing improvement but cannot be separated from the Property and sold off. Surplus Land does not have an independent highest and best use and may or may not contribute to the value of the improved parcels.

Required Analysis and Reporting

The Appraiser must include the highest and best use analysis in the appraisal report to support the Appraiser’s conclusion of the existence of Excess Land. The Appraiser must include Surplus Land in the valuation.If the subject of an appraisal contains two or more legally conforming platted lots under one legal description and ownership, and the second vacant lot is capable of being divided and/or developed as a separate parcel where such a division will not result in a nonconformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land. The value of the second lot must be excluded from the final value conclusion of the appraisal and the Appraiser must provide a value of only the principal site and improvements under a hypothetical condition

 

[BillyD]

It is definitely without any doubt excess land. Just wondering what to put in the grid for site size and if its possible to have a 25,000 sf legally described site (page one cant change as it is 25,000 and will be encumbered under the loan) and then push it through with 12500 in the grid. Its actually a refinance.

Its smack you in the face obvious excess land. No reasonable person could argue otherwise. Its the clearest case you could probably ever have.

For clarification, one parcel (PIN), but two clearly defined sites. House was purchased in 2018, second site in 2021. They are joined under one PIN and legal description for tax savings only. They each have separate utilities (water, sewer and electric service). Lots 28-31 have the improvements edge to edge minus setbacks with perimeter fencing. Lots 31-34 are vacant but have all the utilities hooked up. They are not needed to support the existing improvement and can be sold separately.

 

[BillyD]

Thanks, Interesting take Dublin Ohio "You only value to primary site using a hypothetical condition. So if using a hypothetical. I would only used the area of the primary site throughout the report"

While I agree, its such a can of worms, though. Do you change the legal as well. Does the parcel number get marked N/A or just explain that only part of the lots under the parcel are being appraised. Thoughts?